Qualifying interest in possession trusts ― IHT treatment

Produced by a Tolley Trusts and Inheritance Tax expert

Trusts and Inheritance Tax

Guidance

This guidance note details the IHT treatment of qualifying interest in possession trusts on the death of the beneficiary or on a termination in their lifetime and explains the calculation in each case, including any exemptions that are available.

When a QIIP is charged to inheritance tax

Trust property, which is the subject of a qualifying interest in possession (QIIP), may become chargeable to inheritance tax on the following occasions:

•
on the death of the beneficiary with the interest in possession
•
on the death of the beneficiary within seven years after a transfer or lifetime termination of his interest
•
on the transfer or conversion of the interest to a non-qualifying or discretionary interest during the beneficiary’s lifetime.

Property in which a QIIP subsists is not relevant property so it is not subject to principal (10-year) and exit charges during the life of the trust. See the Relevant property guidance note, and other notes in the ‘relevant property’ sub-topic for details of the relevant property tax

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Qualifying interest in possession trusts ― IHT treatment

Qualifying interest in possession trusts ― IHT treatment